Question 1

The current value in today's dollars of a future sum of money is called

Accepted Answer

A)  future value. 
B)  adjusted value. 
C)  compounded value. 
D)  present value. 
E)  discounted value. 
A)  future value. 
B)  adjusted value. 
C)  compounded value. 
D)  present value. 
E)  discounted value.

Question 2

Define an amortized loan and give two common examples.

Accepted Answer

An amortized loan is a loan paid off in

Question 3

A one-time investment of $1,500 at a 10 percent annual rate of return yields $2,196 in two years.The $2,196 is known as the

Accepted Answer

A)  present value. 
B)  compound value. 
C)  principal plus interest. 
D)  future value. 
E)  annuity value 
A)  present value. 
B)  compound value. 
C)  principal plus interest. 
D)  future value. 
E)  annuity value

Question 4

When a loan is paid off in equal installments,this is called a(n)________ loan.

Accepted Answer

A)  amortized 
B)  discounted 
C)  balloon 
D)  reverse annuity 
E)  none of the above 
A)  amortized 
B)  discounted 
C)  balloon 
D)  reverse annuity 
E)  none of the above

Question 5

You have been saving toward the purchase of a new mountain bike.Five years ago,you placed $600 in a bank account,and you have since earned an annual rate of return of 12 percent.How much do you now have in your account?

Accepted Answer

A)  $1,057.41 
B)  $1,293.71 
C)  $978.70 
D)  $1,138.70 
A)  $1,057.41 
B)  $1,293.71 
C)  $978.70 
D)  $1,138.70

Question 6

What would be the interest rate on a loan of $39,927.10 that you paid off with annual payments of $10,000 for each of the next five years?

Accepted Answer

A)  8% 
B)  10% 
C)  15% 
D)  21% 
E)  26% 
A)  8% 
B)  10% 
C)  15% 
D)  21% 
E)  26%

Question 7

Suppose that you place $450 in a bank account each year for the next 20 years.How much would be in your bank account at the end of the twentieth year if the deposits earned an annual rate of return of 6% each year?

Accepted Answer

A)  $9,540.00 
B)  $10,876.31 
C)  $14,729.44 
D)  $16,553.52 
A)  $9,540.00 
B)  $10,876.31 
C)  $14,729.44 
D)  $16,553.52

Question 8

Allowing the interest that you earn on an investment to stay in the investment and to earn interest on the interest you have already earned is called what?

Accepted Answer

A)  The power of of present value 
B)  The power of compound interest 
C)  The power of simple interest 
D)  The power of time 
E)  The power of future value 
A)  The power of of present value 
B)  The power of compound interest 
C)  The power of simple interest 
D)  The power of time 
E)  The power of future value

Question 9

Most people achieve comfortable retirements by postponing saving until after age 50,when they are able to save a large amount on a regular basis.

Accepted Answer

A) True 
 B)False

Question 10

A dollar received in the future is worth more than a dollar received today.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that you placed $500 in a bank account at the end of each year for the next 10 years.How much would be in that account at the end of the tenth year if the deposits earned an annual rate of return of 8% each year?

Accepted Answer

A)  $8,079.46 
B)  $5,400.00 
C)  $7,243.28 
D)  $6,355.04 
E)  $7,774.51 
A)  $8,079.46 
B)  $5,400.00 
C)  $7,243.28 
D)  $6,355.04 
E)  $7,774.51

Question 12

Present value lets us compare dollar values from different time periods.

Accepted Answer

A) True 
 B)False

Question 13

You just purchased a vacant lot for your future son-in-law's home for $30,000.You financed that amount over 120 months.What would your monthly payment be if your interest rate was 12% compounded monthly?

Accepted Answer

A)  $430.41 
B)  $389.21 
C)  $231.22 
D)  $189.02 
A)  $430.41 
B)  $389.21 
C)  $231.22 
D)  $189.02

Question 14

The future value of a current investment earning a positive rate of return is always greater than the present value of the investment.

Accepted Answer

A) True 
 B)False

Question 15

What is the present value of an IOU for $1,000 due to be paid in two years,if the discount rate is 8%?

Accepted Answer

A)  $857.34 
B)  $766.40 
C)  $885.00 
D)  $683.26 
E)  $810.77 
A)  $857.34 
B)  $766.40 
C)  $885.00 
D)  $683.26 
E)  $810.77

Question 16

How much did you borrow if your annual payments are $5,000 for the next seven years and the interest rate is 9%?

Accepted Answer

A)  $25,164.76 
B)  $36,002.17 
C)  $19,140.20 
D)  $27,797.84 
A)  $25,164.76 
B)  $36,002.17 
C)  $19,140.20 
D)  $27,797.84

Question 17

Compounding is when the interest you have already earned on an investment earns interest.

Accepted Answer

A) True 
 B)False

Question 18

Sam's uncle promised to give him $7,000 when he graduates from college three years from now.Assuming an interest rate of 8 percent compounded annually,what is the value of Sam's gift right now?

Accepted Answer

A)  $5,504.22 
B)  $5,510.78 
C)  $5,556.83 
D)  $5,555.55 
A)  $5,504.22 
B)  $5,510.78 
C)  $5,556.83 
D)  $5,555.55

Question 19

Which one of the following is the "enemy" of compound interest and makes it very difficult to reach your financial goals?

Accepted Answer

A)  Inflation 
B)  Annuity factor 
C)  Simple interest 
D)  Compound frequency 
E)  None of the above 
A)  Inflation 
B)  Annuity factor 
C)  Simple interest 
D)  Compound frequency 
E)  None of the above

Question 20

Why is the time value of money an important concept in financial planning?

Accepted Answer

The time value of money allows us to see

The current value in today's dollars of a future sum of money is called

Define an amortized loan and give two common examples.

A one-time investment of $1,500 at a 10 percent annual rate of return yields $2,196 in two years.The $2,196 is known as the

When a loan is paid off in equal installments,this is called a(n)________ loan.

You have been saving toward the purchase of a new mountain bike.Five years ago,you placed $600 in a bank account,and you have since earned an annual rate of return of 12 percent.How much do you now have in your account?

What would be the interest rate on a loan of $39,927.10 that you paid off with annual payments of $10,000 for each of the next five years?

Suppose that you place $450 in a bank account each year for the next 20 years.How much would be in your bank account at the end of the twentieth year if the deposits earned an annual rate of return of 6% each year?

Allowing the interest that you earn on an investment to stay in the investment and to earn interest on the interest you have already earned is called what?

Most people achieve comfortable retirements by postponing saving until after age 50,when they are able to save a large amount on a regular basis.

A dollar received in the future is worth more than a dollar received today.

Suppose that you placed $500 in a bank account at the end of each year for the next 10 years.How much would be in that account at the end of the tenth year if the deposits earned an annual rate of return of 8% each year?

Present value lets us compare dollar values from different time periods.

You just purchased a vacant lot for your future son-in-law's home for $30,000.You financed that amount over 120 months.What would your monthly payment be if your interest rate was 12% compounded monthly?

The future value of a current investment earning a positive rate of return is always greater than the present value of the investment.

What is the present value of an IOU for $1,000 due to be paid in two years,if the discount rate is 8%?

How much did you borrow if your annual payments are $5,000 for the next seven years and the interest rate is 9%?

Compounding is when the interest you have already earned on an investment earns interest.

Sam's uncle promised to give him $7,000 when he graduates from college three years from now.Assuming an interest rate of 8 percent compounded annually,what is the value of Sam's gift right now?

Which one of the following is the "enemy" of compound interest and makes it very difficult to reach your financial goals?

Why is the time value of money an important concept in financial planning?

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

Student and Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: An Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters

Exam 3: Understanding and Appreciating the Time Value of Money

The current value in today's dollars of a future sum of money is called

Define an amortized loan and give two common examples.

A one-time investment of $1,500 at a 10 percent annual rate of return yields $2,196 in two years.The $2,196 is known as the

When a loan is paid off in equal installments,this is called a(n)________ loan.

You have been saving toward the purchase of a new mountain bike.Five years ago,you placed $600 in a bank account,and you have since earned an annual rate of return of 12 percent.How much do you now have in your account?

What would be the interest rate on a loan of $39,927.10 that you paid off with annual payments of $10,000 for each of the next five years?

Suppose that you place $450 in a bank account each year for the next 20 years.How much would be in your bank account at the end of the twentieth year if the deposits earned an annual rate of return of 6% each year?

Allowing the interest that you earn on an investment to stay in the investment and to earn interest on the interest you have already earned is called what?

Most people achieve comfortable retirements by postponing saving until after age 50,when they are able to save a large amount on a regular basis.

A dollar received in the future is worth more than a dollar received today.

Suppose that you placed $500 in a bank account at the end of each year for the next 10 years.How much would be in that account at the end of the tenth year if the deposits earned an annual rate of return of 8% each year?

Present value lets us compare dollar values from different time periods.

You just purchased a vacant lot for your future son-in-law's home for $30,000.You financed that amount over 120 months.What would your monthly payment be if your interest rate was 12% compounded monthly?

The future value of a current investment earning a positive rate of return is always greater than the present value of the investment.

What is the present value of an IOU for $1,000 due to be paid in two years,if the discount rate is 8%?

How much did you borrow if your annual payments are $5,000 for the next seven years and the interest rate is 9%?

Compounding is when the interest you have already earned on an investment earns interest.

Sam's uncle promised to give him $7,000 when he graduates from college three years from now.Assuming an interest rate of 8 percent compounded annually,what is the value of Sam's gift right now?

Which one of the following is the "enemy" of compound interest and makes it very difficult to reach your financial goals?

Why is the time value of money an important concept in financial planning?

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

Student and Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: An Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters